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GM and friends of Angelo

The WSJ writes in China's SAIC Finalizing Plans to Buy GM Stake:

The issue of foreign investors buying GM shares in the company's IPO is a sensitive one for the U.S. government, which will reduce its 61% stake in the auto maker in the IPO. Treasury also is worried about the political reaction if non-U.S. investors, such as sovereign-wealth funds or a Chinese company, are allowed to acquire a significant stake in GM after U.S. taxpayers spent $50 billion to assist the company through bankruptcy reorganization.

But like everything else with a government deal lately, you have to read the fine print and follow the money. The allocation of the IPO is just one of the long line of wealth transfers in this process, and the list and process by which it was managed should be made public. The list of sovereign investment funds and now familiar large domestic institutions would be of interest. One suspects the IPO will be carefully staged, dramatically under priced, such that it has an initial pop, thus pumped as a huge success.  Who gets the money? Check the allocation. If it does pop, you know the taxpayer has been shorted for the sake of publicity.

if that happens, it would be good news for the Obama administration, which could find itself under fire for pricing the deal too low—thus shortchanging taxpayers—if GM's post-IPO price rises sharply after the offering.

Last we heard the retail shops, the Schwabs, AmeriTrades et al, were shut out. One wonders why... perhaps if you want your ticket punched it should be suitably large and you have to hang around a bit?

The other element to follow the taxpayer's money is the special treatment accorded GM's NOL's, the net loss carry forwards. Typically these are expunged in a bankruptcy, but we understand special treatment allowed them the be carried forward into the new entity which means that the taxpayer subsidy is even greatly understated. If the new entity is profitable, it will likely pay no taxes... just another wealth transfer.

For the record, we don't like the process. We don't like it when it seems the 'fix' is in ...  bought and paid for with taxpayer's money and seemingly manipulated without regard to costs for non-economic outcomes. But that seems old hat these days.

This smells like an Angelo Mozilo friends & family deal. Just watch.


Hate to do this, but we need some disclaimers & fine print on this one:

For sake of clarity, this is an opinion, which we urge you to consider as possibly uninformed or misguided, on a process, not a security.  We make no recommendation whatsoever on this particular security nor do we express an opinion of any kind on any particular price and nothing herein shall be so construed.  We have no  position (other than that which may or may not exist in broadly based indexed product) or economic interest in the offering.  We have never subscribed to an IPO and don't intend to start, so we're not sour graping about the allocation. We make no representation or warrantee whatsoever as to the accuracy of any information posted herein. Nothing herein shall be considered to be an offering of any security; an endorsement or recommendation of any particular security; or an opinion or recommendation as to the suitability or appropriateness of any particular investment strategy. WWB does not offer legal or tax advice and nothing herein shall be so construed. No kidding.


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